Construction Payroll: Be Careful with Independent Contractors

Construction company owners in Colorado need to keep an eye on a brand-new task force established by the governor to root out payroll fraud within the industry. As for the rest of us, we will be paying attention to see what happens in the Centennial State. Even modest success by the task force could translate into other states implementing similar actions.

An executive order signed by Governor John Hickenlooper in early June created a joint task force comprised of numerous employer and employee groups and tasked with the responsibility of investigating worker misclassification among Colorado construction firms. As you probably know, misclassification is one of the biggest problems of construction payroll.

The construction industry is such that it is not always practical to hire hourly workers or salaried employees. Work isn't always guaranteed and staffing a construction firm's entire workforce with regular employees just doesn't translate well. Independent contractors are the solution. They provide the same kinds of services but without the obligations of employment. Contractors are free to come and go as work demands.

The Problem in Colorado

Governor Hickenlooper contends that there is a serious misclassification problem in Colorado. He went as far as to say that the state's legitimate construction operators are being harmed by those who are not following the rules.

“Law-abiding companies and workers are being undercut by those who skirt the law in Colorado,” Hickenlooper said in announcing his executive order. “This task force will bring all parties together to find the right solutions to root out any illegal labor activity in our state.”

The Joint Enforcement Task Force on Payroll Fraud and Employee Misclassification in the Construction Industry will immediately begin investigating Colorado construction companies and sharing what they learn with interested state agencies. A number of state agency leaders are part of the task group as well, guaranteeing that government notification will be a reality.

The Classification Issue

Worker classification has long been a problem for construction payroll. At issue are the sometimes-vague rules that can make it difficult to tell the difference between a genuine contractor and an employee. Until Washington and the various states fine-tune those rules to make them more clear, construction companies will continue to struggle.

In fairness, it is true that some construction companies choose to push the contractor classification envelope to avoid payroll taxes, unemployment insurance, and workers’ comp. Colorado officials believe that the number of construction companies in their state guilty of doing so is large enough to warrant enforcement action.

BenefitMall Can Help

If you run a construction company in Colorado, how are you handling payroll? BenefitMall can help you maintain compliance by taking responsibility for your payroll off your shoulders and putting it on ours. We have a specialized payroll solution for construction companies, a solution that takes into account your industry's unique needs.

Even construction companies outside of Colorado can benefit from our specialized solution. To that end, we invite you to contact us to learn more about our services. There is no need for your company to run afoul of the law just because of the complexities of payroll. We are experts in construction payroll, and we can help you get your payroll house in order.

In the meantime, construction companies in the Centennial State need to start going over the payroll records right away. If necessary, company owners should get with their tax professionals or attorneys for a complete review of compliance. Companies found non-compliant by the state task force might eventually be referred for enforcement. That is not something any company owner really wants.